Qualifying Deals at Current Market Levels

[Ken Chud]

looking at the deals, i cant understand how people make their money in buy and holds at these price levels.

purchase price 420k, 3 units, total gross rent 4375/mo. Taxes 5500/yr, insurance 5500/yr, water 2500/yr. With 20% down at 7.5% for 30 yrs, principal interest, taxes, insurance is 3100/mo. + 250ish water a month + grounds keeping 100/mo= 3450 total expense. This excludes property management, which i were to so myself. This leaves out with about 900 cash flow or $300 per unit per month. The theme is roughly the same across the industry. How can one go in the business at these levels?

[Kate Nixon Taylor]

Hi Ken,

Buying turnkey does mean less cashflow in todays market on average. I have seen the investors in my area making great returns on rehab-to-rent, build-to-rent, and build-to-sell. Obviously with these deals, the ARV needs to make sense and the location of the property is crucial to force enough equity.

One of the best methods I have seen is buying a house with a lot that has enough space to develop and then subdividing the lot to build. My friend is the COO of a company doing this and making over 100% returns.